CIMA BA1 · Chapter 10 · Question 10 of 10
An index is calculated as the weighted average of price relatives. Item A has a price relative of 120 and a weight of 3. Item B has a price relative of 105 and a weight of 2. What is the index?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 114
Explanation
Weighted average = (120 x 3 + 105 x 2) / (3 + 2) = (360 + 210) / 5 = 114. A simple average of the relatives gives 112.5, and reversing the weights gives 111.
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